What Does Gap Car Insurance Cover and What Does it Exclude?
Getting a new car is a pivotal moment in one's life. And, as a responsible car owner, making sure you have the insurance coverage you need for it is one of the most important things you can do to protect your new vehicle. Of course, you don't want to have a gap in your car insurance. You might be thinking, "it won't happen to me" but if it does happen to you then it'll be too late and it could end up costing you thousands of dollars. This is why no matter how responsible you are and how careful a driver you are, you still need to have gap car insurance.
Defining gap Insurance
Gap insurance is an optional, add-on insurance coverage that can help you cover the "gap" between the amount you owe on your car and the car's actual cash value (ACV) in the event of an accident. A car's actual cash value is a car's monetary value at the time of the accident, not the car's original price.
Gap Insurance Example
Let's say you're involved in a covered accident and are found not at fault. Your car is damaged beyond repair and needs to be replaced. You still owe $15,000 on your auto loan but your car's ACV is only $11,000. If you have gap insurance, it can help you cover the $4,000 gap between what you owe on your loan what your car is worth, after the deductible.
While having gap insurance coverage is important, it is just as important to know what those coverages mean.
What Total Losses Gap car Insurance Covers
As you can see, pretty much any totaled loss your regular car comprehensive and collision insurance will cover, gap insurance will also cover. Most gap car insurance policies will also cover your insurance deductible.
What Does Gap Car Insurance Exclude?
Understanding the details of your gap car insurance is crucial because there are gaps that exist. These gaps include things that you're probably not aware of such as that new high tech AV system you installed. Below are the most common exclusions to be aware of.
6 Common Gap Car Insurance Exclusions
1. Cars that are not covered by both comprehensive and collision insurance are excluded.
2. Any equipment on your vehicle that was not installed in the factory.
3. Money that was "rolled" Into the car loan such as money from a trade-in or a leased vehicle.
4. Incurred costs for any other products that were added to the loan or lease which includes such things as extended warranties.
5. Any of your unpaid or overdue lease or loan payments.
6. Any financial penalties or security deposits on your leased vehicle.
It's important to remember that these are only examples of common coverages and exclusions. As a car owner, it's your job to check your own policy to see what your specific gap car insurance coverages and exclusions are.